Three years after the Arab Spring, the economies of the Middle East and North Africa region remain depressed.
Political turmoil in Egypt, stalemate in Tunisia and an escalation of the civil war in Syria with spillovers to neighboring Lebanon and Jordan have weakened activity in the developing oil-importing countries. Egypt’s GDP contracted by 3.2 percent (saar) in 2013Q2, and growth for the fiscal year (ending in the same quarter) amounted to 2.0 percent, down from a modest 2.3 percent in 2012.
Industrial production in the oil-importing countries contracted by 36 percent (saar) in three months through October, led mainly by sharp declines of 44 percent in Egypt. However, Purchasing Managers Index (PMI) survey crossed into positive territory in November 2013 for the first time in 13 months and stayed above in December as well, signaling an improvement in manufacturing output going forward.
Tourism arrivals to the oil-importing countries plunged dramatically because of security uncertainties in the wake of the overthrow of Morsi government in Egypt and the continuing Syrian civil war, which affected Lebanon and Jordan. Tourist arrivals dropped by 57 percent (saar) in three months through September in the oil-importing countries of the region.
Oil production in developing oil-exporting countries—accounting for nearly a third of the region’s oil output—has fallen over the past year by nearly 8.5 percent (year to date) in 2013, reflecting security setbacks, strikes, and infrastructure problems in Algeria, Iraq, and Libya, and international sanctions in the case of the Islamic Republic of Iran.
External imbalances have worsened across the developing countries of the region. Current account deficits have widened in the oil-importing countries—hurt particularly by the steep decline in tourism receipts—while current account surpluses have shrunk for the oil-exporting countries as oil exports have declined.
With only a few exceptions, fiscal imbalances have worsened across the region, especially in oil-importing countries. Deterioration reflects weaker revenues due to slow growth, rising public sector spending on wages, subsidies for food and fuel in the wake of the Arab Spring and, in some cases, increased debt servicing charges.